Introduction to this report:

Q2 Performance fell short of expectations, gross margin was under pressure, and new business was growing at a high rate. With the large-scale promotion of 5G rich media messaging, the company's first-mover advantage is remarkable. Going international creates a new channel for overseas marketing for overseas companies.

Key points of investment:

Lower profit forecasts and target prices to maintain holdings growth ratings. Considering the pressure on the company's gross margin side, the net profit for 2023-2025 was lowered to 1.58/2.50/4.22 billion yuan (previous value was 2.31/3.92/498) million yuan, and the corresponding EPS was 0.19/0.31/0.52 yuan. Considering the company's leading position and future profitability, it is expected that future profitability will continue to be optimized. Referring to the valuation level in the same industry, PS will be given 2.5 times in 2023, and the target price will be lowered to 17.47 yuan to maintain the increase rating.

Q2 Performance fell short of expectations, gross margin was under pressure, and new business was growing at a high rate. In the first half of the year, the company's revenue was 2,364 million yuan, +42.27%, of which 5G rich media messaging revenue was +155.81%, business volume was +136%, international cloud communications revenue was +324.98%, and business volume was +274%. Gross margin fell 0.83 pct to 9.10% year over year. It achieved net profit of 40 million yuan, +758.36% over the same period, and the revenue and profit share of new businesses such as 5G rich media messaging has steadily increased.

With the large-scale promotion of 5G rich media messaging, the company's first-mover advantage is remarkable. The company is the first enterprise in the industry to launch commercial video and SMS operations. It is a full-network service provider for three operators, and has successively established cooperative relationships with well-known domestic and foreign terminal manufacturers such as Huawei, Xiaomi, OPPO, VIVO, Samsung, Meizu, and ZTE. The touchpoint traffic of the message inbox is at the system level and operation level. It has the underlying touchpoints and logic. The access of AI and large models facilitates in-depth interaction between merchants and users.

Going international creates a new channel for overseas marketing for overseas companies. Dreamnet International Cloud Communications products include international cloud SMS, RBM, WhatsApp, Viber, voice voice verification codes, etc., and has successively set up branches in Indonesia, Australia, and Nigeria, and has established strategic cooperation with more than 1,200 operators around the world.

Risk warning: The development of the 5G messaging ecosystem falls short of expectations, and there is a risk of impairment of goodwill.